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Agglomeration and Co-Agglomeration of Services Industries

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  • Kolko, Jed

Abstract

Economic research on industry location and agglomeration has focused nearly exclusively on manufacturing. This paper shows that services are prominent among the most agglomerated industries, especially at the county level. Because traditional measures of knowledge spillovers, natural resource inputs, and labor pooling explain little of agglomeration in services industries, this paper takes an alternative approach and looks at co-agglomeration to assess why industries cluster together. By considering the location patterns of pairs of industries instead of individual industries, the traditional agglomeration explanations can be measured more richly, and additional measures – like the need to locate near suppliers or customers – can be incorporated. The results show that co-agglomeration between pairs of services industries is driven by knowledge spillovers and the direct trading relationship between the industries, especially at the zip code level. Information technology weakens the need for services industries to co-agglomerate at the state level, perhaps because electronic transport of services outputs lowers the value of longer-distance proximity. These results are in sharp contrast to results for manufacturing, for which labor pooling contributes most to co-agglomeration, and the direct-trading relationship contributes more to state-level co-agglomeration. These differences between services and manufacturing are consistent with simple models of transport costs.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 3362.

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Date of creation: Apr 2007
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Handle: RePEc:pra:mprapa:3362

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Keywords: agglomeration; economic geography; services; technology; internet; co-agglomeration; firm location; transport costs;

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  1. Jaffe, Adam B & Trajtenberg, Manuel & Henderson, Rebecca, 1993. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 577-98, August.
  2. Duranton, Gilles & Puga, Diego, 2001. "From Sectoral to Functional Urban Specialization," CEPR Discussion Papers 2971, C.E.P.R. Discussion Papers.
  3. Ed Glaeser & Jed Kolko & Albert Saiz, 2000. "Consumer City," NBER Working Papers 7790, National Bureau of Economic Research, Inc.
  4. David Neumark & Junfu Zhang & Brandon Wall, 2005. "Employment Dynamics and Business Relocation: New Evidence from the National Establishment Time Series," NBER Working Papers 11647, National Bureau of Economic Research, Inc.
  5. Henderson, Vernon, 1997. "Externalities and Industrial Development," Journal of Urban Economics, Elsevier, vol. 42(3), pages 449-470, November.
  6. Glaeser, Edward L & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1992. "Growth in Cities," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1126-52, December.
    • Edward L. Glaeser & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1991. "Growth in Cities," NBER Working Papers 3787, National Bureau of Economic Research, Inc.
    • Glaeser, Edward Ludwig & Kallal, Hedi D. & Scheinkman, Jose A. & Shleifer, Andrei, 1992. "Growth in Cities," Scholarly Articles 3451309, Harvard University Department of Economics.
  7. Jess Gaspar & Edward Glaeser, 1996. "Information Technology and the Future of Cities," NBER Working Papers 5562, National Bureau of Economic Research, Inc.
  8. Guy Dumais & Glenn Ellison & Edward L Glaeser, 1998. "Geographic Concentration as a Dynamic Process," Working Papers 98-3, Center for Economic Studies, U.S. Census Bureau.
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Cited by:
  1. Rafael González-Val, 2011. "What makes cities bigger and richer? New Evidence from 1990–2000 in the US," ERSA conference papers ersa11p325, European Regional Science Association.
  2. Edward L. Glaeser & William R. Kerr, 2008. "Local Industrial Conditions and Entrepreneurship: How Much of the Spatial Distribution Can We Explain?," Harvard Business School Working Papers 09-055, Harvard Business School.
  3. Robert Faff & Tribeni Lodh & Jerry Pawada, 2012. "Location Decisions of Domestic and Foreign-Affiliated Financial Advisors: Australian Evidence," Journal of Financial Services Research, Springer, vol. 42(3), pages 207-228, December.

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